Financial Status of Healthcare Organizations

Question One 

Financially sustainability at Seamus Company 

There are three recommendable strategies the CFO at Seamus Company can use to move away from the fee-for-service model. The CFO can either use Point of Services (POS), Health Maintenance Organization (HMO) or Preferred Provider Organization (PPO). HMOs are critical in this case because apart from delivering care to the patients, they also provide money for medical expenses. HMO operates in a business nature consisting of hospitals, the insurer, and the physician. HMOs are critical because they are multipurpose. First, HMOs have no maximum lifetime payment. Besides, they provide lower cost out-of-pocket expenses and lastly, they also help with daily expenses, which are meant to cater to life through preventive care ( Youn et al., 2016). PPO, on the other side, is a well-coordinated group of practitioners that offer medical treatments services to individuals. PPO can acquire financial support from any insurer, employer, or association with policyholders. PPO’s out-of-pocket expenses have lower limits than those of the HMO. Unlike the HMO that covers what is within the Hospital networks, the PPO covers both inside and outside networks. POS is the third strategy the company can use. Henke et al. (2018) argue, "POS plans allow for users to have much more choice when deciding between healthcare providers. There is typically no deductible, and out-of-pocket costs are limited.” 

Strategies 

In consideration to cost savings associated with MCO, HMO is cheaper than any other policy. HMO has a lower deductible than an approach like a PPO plan. In this case, the company will reduce its payments portion, thus saves costs. Further, the HMOs come with lower premium packages. The HMOs have insurances carriers that can negotiate with the insurance providers to reduce their premium rates and thus allows for a reduced premium. The PPO and the PPS are also cost saving in one way or the other; however, they are less cost saving when placed in comparison to the HMO ( Dafny et al., 2017). As the company will embrace the MCO plan, the company will be in a position to lower employees' benefits, and this will thus reduce the cost of the operation for the company. The employees' contribution to health insurance usually is tax deductible. Since these contributions are tax-deductible, they will possibly lower the company’s expenditure, and this will also be cost-saving, which is applicable for all the three strategies, which are POS, PPO, and HMO. 

The PPO, POS, and HMO will still inject some benefits to the Seamus Corporation's fiscal management. According to Youn et al. (2016) , "Due to the nature of fixed cost for premiums with MCOs, Seamus would be able to better budget, forecast, and allocate expenses going forward. Another benefit to the fiscal management of the company would be that with the more structured HMO system, Human Resources would not have to expend as much energy dealing with benefits." In this case, the company has two options that all result in a lowered budget. It will allow the company the capacity to do more or eliminate some employees for the company and thus will result in a reduced budget with regards to salaries ( Henke et al., 2018). There are many tax advantages which come alongside the decision to move to MCO. First, any of the POS, PPO, or the HMO will come with low premiums for the company. The fee for the bonus in these cases will be less than the price- for - services plan. Through the taxes, companies will pass the savings to the employees. In general, this will reduce the cost of operation to the company and thus will be a huge advantage. According to Henke et al. (2018), although all these strategies are better than the fee-for-service, HMO plan is much better since it is more cost saving than any of these strategies. 

Financial Management Principle 

The principle of cost and the cash principle are sound economic principles that would successfully aid this company while moving from fee-for-service to the HMO plan. Cost minimization and management are challenging to Hospitals due to their dual roles of profit maximization and provision of the quality care to the population. One of the recommendable means of cost minimization for the hospitals is to demand more from the health plan participants for the cost-sharing. Another recommendable strategy is to target the long run cost, which links to healthcare. "Many employers are not offering wellness programs that involve employee coaching, medication management, and step counting. This approach allows employees to take ownership of their health and in turn, lowers healthcare costs for not only them but also the company” ( Youn et al., 2016). The company must have a good cash flow while initiating the move from the Free-for-services to the HMO plan. There are a lot of expenses in this case, and the company will have to be stable financially to finance any of the costs that are necessary for a good transition. However, the company must be assured that if they change to the HMO, it will be easy to manage its cash revenue cycle, which is always a challenge for all healthcare organizations worldwide. 

Strategy Alignment 

The organization's primary goal is to reduce the cost of health insurance. In this case, the organization needs a strategy which will reduce the cost of its operations to ensure that employees achieve their goals. Implementation of the HMO is thus the strategy that will guarantee the hospital's goal. The HMO will accomplish this goal by utilizing in-network doctors. In this case, the organization will be in a position to able to reduce the amount billed to the insurance company as part of their agreement. Henke et al. (2018) assert this will, in turn, reduce the overall healthcare cost for Seamus Company. 

Question Two 

Utilization Risk Strategy 

The company needs to have healthcare utilization risk strategy on the course of the transition to the HMO model. In this case, the company will be in apposition to offer increase services benefits and thus will be the foundation of undertaking the healthcare utilization risk evaluation. The company will have to face additional risks because of the other services that will come as a result of the implementation of the HMO plan. Youn et al. (2016) note that the company thus will have to try to manage the healthcare for their employees by having in place different welfare programs that would aid in better controlling the costs and reduces risks. 

Financial Benefits 

The three economic benefits that are possible for this company is managing workers’ compensation lowered overall healthcare costs and employees' retention due to the increased loyalty. With the HMO and increase services come alongside the negotiated rates with lower premiums. Additionally, these strategies also come with low out-pocket expenses. In this case, the company will be in apposition to gain profit as some of the costs shall reduce. Apart from HMO being an insurance provider, it can also manage care. HMO can provide care that focuses on wellness, prevention, and implements strategies for managing workers' compensation claims. In this case, the employees will be taking critical measures to modify their behaviors while making health decision. Such moves will reduce health claims. The few cases of health claims that will occur will be easy to manage by the HMO programs. In this case, the Seamus will reduce the cost of its operations. Finally, the organization will retain its employees upon shifting to HMO ( Youn et al., 2016). As the company will be offering the employee more services, the health status of the employee will boost. In this case, it is reasonably expectable that these employees will be able to remain with Seamus. Retaining employees is cost saving because it will reduce different expenses that can be incurred in advertising positions and marketing the company while pursuing other potential employees. 

Potential Financial Drawbacks 

The first drawback is that the employees may not utilize preventive care as the company postulates, and this would lead to loss of time and productivity since there would cost increments for the company. In this case, the employee will become inevitably ill, and this will be a massive loss of time productivity and efficiency to the organization. The second drawback is that the company can harm cost if the employees misuse the benefits of the increased services. The situation can occur when the employee uses the plan for treatment on a frequent occasion, mostly for minor health issues ( Youn et al., 2016). The activity will increase the cost of the company. The last drawback is where the overall healthcare costs could increase over time as health insurance premiums become competitive, and this would end up challenging this organization. 

Employee Usage 

The transition from Fee-for-services to the Managed MCO of an HMO will come alongside a significant profit to the employees as they will be using these services offered by the company for their better health. HMO implement preventive care, and this will ensure that there are fewer cases of ill-health among the employees in the organization. As companies identify risks for employees, coaching sessions can be available to help employees lower their risk factors and increase their health ( Henke et al., 2018). It will bring a situation where the employee spends less and thus will be cost effective for the organization as well as the employees. 

Question Three 

Financial Benefits from External Healthcare Partnerships 

Partnering with the local clinics and the local gym will be suitable for the organization when implementing the HMO plan. For instance, the organization will be offering expenses such as screening and lab test for its HMO wellness programs. If it can partner with external clinics so that they join their activities, the organization can cut costs, and this would be beneficial ( Henke et al., 2018). On the other hand, the organization will also benefit if it can strike good partnership wilt local gyms. The gym will help the employees by providing different health-oriented activities that would increase their health status, and this would possibly reduce the care cost for the employees and the organization. 

Financial Drawback from External Healthcare Partnerships 

The first drawback will come when the employees underuse the gym programs, which will be a situation where the applications are paid for by the company, yet the employees are underusing them. In this case, the company shall have wasted much money ( Dafny et al., 2017). Another drawback will come when the employees over utilize the discountable lab services. If the employees start using lab services for another common disease such as UTI, it will be a massive blow for the company as they will have to pay more and this will be cost full. 

External Healthcare Partnership 

In this case, it would be better for the company to move its healthcare towards an HMO model and in doing so, they need to include external partnerships that would offer employee benefits as well as overall cost savings for Seamus Company ( Youn et al., 2016). 

Justification of Determination of External Healthcare Partnerships 

It is evident that the company will be risking integrating external partnership in HMO operations. However, it will be cost saving because of proper management, which will make advantages outweigh the disadvantages. 

References 

Dafny, L. S., Hendel, I., Marone, V., & Ody, C. (2017). Narrow networks on the health insurance marketplaces: prevalence, pricing, and the cost of network breadth. Health Affairs , 36 (9), 1606-1614. 

Henke, R. M., Karaca, Z., Moore, B., Cutler, E., Liu, H., Marder, W. D., & Wong, H. S. (2018). Impact of health system affiliation on hospital resource use intensity and quality of care. Health services research , 53 (1), 63-86. 

Youn, B., Soley-Bori, M., Soria-Saucedo, R., Ryan, C. M., Schneider, J. C., Haynes, A. B., ... & Kazis, L. E. (2016). Patient cost-sharing and insurance arrangements are associated with hospital readmissions after abdominal surgery: Implications for access and quality health care. Surgery , 159 (3), 919-929.